Does Medical Tourism Promote Economic Growth? A Cross-Country Analysis

Abstract

In recent years, many countries have been actively promoting medical tourism to stimulate economic growth. However, the expansion of medical tourism has potentially detrimental effects for the welfare of host countries. In particular, a decline in workers’ productivity could arise as a result of a reduction in public health care provision due to the expansion of the medical tourism sector. By addressing the crowding-out effect on labor productivity, this paper sheds light on the economic impacts of medical tourism on host countries. Our empirical analysis confirms that medical tourism, on average, has a positive effect on host economies’ output growth, particularly in non-OECD countries. Nonetheless, the output contribution of medical tourism is overestimated by an average of 26.8% if the unfavorable indirect productivity effect is not taken into account.